Many people will tell you that the production rate of Saudi Arabia’s Ghawar oil field, which has yielded 5 million barrels of petroleum per day for decades, will never be surpassed. In fact, no other oil field has ever come close to topping the production rate of Ghawar, and up until recently I would have agreed its production would never be topped.
But I am becoming more convinced that the Permian Basin could eventually give Ghawar a run for its money.
That argument would have been laughable a decade ago, but there are three pieces of data that suggest the argument isn’t as preposterous as I once believed it was.
A Rapidly Rising Production Rate
First, there is the actual production rate in the Permian. Consider for a moment that the Permian Basin has been producing oil since the 1920s, and reached the two million BPD mark in the 1970s. Production slowly declined, until dipping back under one million BPD around the turn of the 21st century.
Permian Basin oil production slowly crept back up to one million BPD in 2010, and then hydraulic fracturing sent production soaring. By the end of 2018, production had reached 3.8 million BPD, vaulting the Permian into second place among the world’s leading oil fields. In under a decade — and after already producing oil for a hundred years — Permian Basin production has increased by 3 million BPD:
A Soaring DUC Inventory
But are there indications that Permian production will continue to grow? Yes. Consider the soaring inventory of drilled but uncompleted (DUC) oil wells. These are oil wells that have undergone the initial process of drilling (i.e., the hole in the ground has been drilled). However, to get the well ready for production requires casing, cementing, perforating, and hydraulic fracturing.
There are a number of reasons that a well might be drilled, but not completed. It can be as simple as a lack of available rigs and manpower to complete the wells. Or, it could be that producers are waiting for more takeaway capacity for the oil, which has been an issue in the Permian. Finally, some contracts may require that drilling has been initiated in order to hold a lease.